“Everything is possible” – Trump is considering removing Chinese stock from the US stock exchanges
Chinese companies listed on American stock exchanges were again under pressure. US Treasury Secretary Scott Bessent suggested in a media interview that the Donald Trump administration might consider removing them from the dance floor. This is the next phase of the worsening economical conflict between the 2 world's largest economies.
“Everything is on the table”
– I think everything is on the table," said Bessent, answering the question about the anticipation of delisting Chinese actions. He added that the final decision belongs to president Trump.
These comments fell at a time erstwhile the customs war between the US and China was getting stronger. Last week, Beijing responded to 145% of the duties imposed by Washington, introducing 125% of the charges on American goods.
Risk of delisting – who is the most vulnerable?
According to HSBC analysts, there are around 280 continental China companies with a full capitalisation reaching USD 880 billion. Among them 20 companies, including e-commerce giant PDD (the owner of Temu), Full Truck transport start-up and Vipshop, are listed exclusively in the US.
– We believe that these companies are most at hazard of delisting," said Herald van der Linde, HSBC's stock strategist.
The precedent of Biden
In 2021, 3 Chinese state-owned companies were removed behind Joe Biden's administration from the fresh York Stock Exchange (NYSE) – China Telecom, China Mobile and China Unicom – due to their ties to the Chinese army.
– There is simply a precedent for possible delisting – noted Brian Freitas of Periscope Analytics. – At the time, however, a tiny percent of listed companies were removed, so the impact on the marketplace was limited.
Consequences for investors
– Chinese ADR (American deposit receipts) are becoming a problem again," said Winston Ma, prof. of law at fresh York University. This time abroad investors, especially organization investors, are much more delicate to the hazard of delisting than 3 years ago.
Goldman Sachs estimated that in an utmost scenario, if Americans were cut off from investing in Chinese securities, there could be a sale of valuable assets $800 billion, including companies listed in the USA, Hong Kong and the Chinese mainland market. The possible sale of US government bonds and shares by China is even more dangerous, with the value reaching $1.7 trillion.
Hong Kong as an alternative?
– If rumors of delisting increase, we can anticipate a wave of secondary listings in Hong Kong – says Freitas.
HSBC analysts indicate that although liquidity on the Hong Kong stock exchange is lower than in the US, inclusion of companies in the strategy Stock Connect (combining Shanghai, Shenzhen and Hong Kong markets) could compensate for the difference. If 20 large Chinese companies moved from the U.S. to Hong Kong, the regular turnover of the stock exchange could increase by USD 1 billion.
What's next?
In 2022 the US and China entered into a temporary agreement that allowed US regulators to see the books of Chinese companies, avoiding their removal from the stock exchanges. Now, in the light of politics “American First Investment Policy”, signed by Trump in February, the situation is much little predictable.
– Anything can happen in the current administration," said Winston Ma.
Source: Nikkei Asia
Leszek B. Glass
Email: [email protected]
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